Continuous Planning Provides Action, Agility and Accuracy

Analyst Viewpoint

The term “continuous planning” may conjure up images of never-ending meetings in which nothing gets accomplished, but Ventana Research uses it to describe a highly collaborative, action-oriented approach to corporate planning built on frequent, short planning cycles. This style of planning enables organizations to enhance the relevance and accuracy of their plans for three reasons. One is that this is an integrated operational and financial plan rather than a budget. The second is that it is high- participation planning, which creates a single, integrated view of individual departmental or business- unit plans. The third is that plans are created and updated frequently using very short cycles with a rolling-time horizon focused on key drivers rather than a highly detailed, time-consuming bottom-up process.

Today’s corporate planning is flawed. For example, our benchmark research finds that companies often react too slowly to changing market conditions. They miss opportunities to sell more and wind up allocating resources to less productive or less profitable activities. Especially in larger companies, fragmented, silo-based planning efforts stand in the way of more effective planning processes. Our research shows that, typically, the only company-wide plan is the annual budget, supplemented by monthly revenue reforecasts and budgets revised quarterly or semiannually. Budgets are essential for financial control, but they aren’t the best tool for business planning. Budgets are built around accounting and finance. They only indirectly consider what people running the business must manage: people, products and customers. In contrast, continuous planning sets out measurable performance objectives for these key operational elements.

The key to improving planning is using appropriate information technology to support a more effective process – one that drives better business performance. Our research shows that a large majority of companies use spreadsheets for budgeting and a range of business planning activities. Spreadsheets are an indispensable personal productivity tool, but they are poorly suited to business planning and budgeting.

A dedicated planning application has capabilities and delivers benefits that enhance the effectiveness of any business planning process. For instance, it can eliminate planning silos and enhance collaboration because all the planning models and related data are held in a single system. In contrast, creating a consolidated plan from multiple spreadsheets is time consuming, which makes frequent rapid planning cycles impractical. A dedicated application does a better job of modeling, analyzing and reporting because it can easily manage the dimensions of business information. With dedicated planning software, it’s possible to quickly drill into plan details to compare expected product profitability by sales channel and by quarter using different price scenarios. In addition, creating, modifying and using driver-based models is easier because these systems can easily aggregate individual business unit plans that combine the “things” that drive business results with their monetary value – for example, forecasting revenue based on the number of leads and sales funnel conversion ratios to arrive at a total number of deals closed and multiplying that times an average deal value.

A dedicated planning application enables companies to transform how they plan so that the process is a more useful business management tool. It can streamline the annual budgeting process while at the same time supporting a continuous planning process designed to optimize business performance, one that increases a company’s ability to make timely and accurate decisions in response to changing conditions. Software such as this makes comprehensive scenario planning feasible because it enables the impact of changes in assumptions (such as prices, benefit costs or exchange rates) to be gauged almost instantly, saved and compared.

High-participation, collaborative planning can be more accurate because it brings more front-line intelligence to the process. It also increases accountability – it’s no longer “the finance department’s budget” when a company can remove the constraints that limit who’s involved in a spreadsheet- imposed, silo-based planning environment.

A dedicated planning application can accelerate the pace of planning and review sessions, making them more action-oriented. Since every department’s plan is held in a single data store, the impact of a change in one unit’s plan or even in a global assumption can be assessed almost instantly. Similarly, in a monthly review session, it’s possible to consider the effect of one course of action vs. another right away. In both cases, it’s the end of “I’ll get back to you later” as a response to the question, “What would happen if ... .” This capability is especially useful for rapidly responding to significant changes in the business environment and to support business continuity under trying circumstances.

Continuous planning makes planning a more useful management tool. Short and frequent planning cycles are more accurate. They enable companies to continuously adjust to change, making them more agile. By setting operational objectives as well as financial ones, performance management can be more effective. Continuous planning is action-oriented because in planning and review sessions it’s possible to immediately drill down into details to answer why a condition exists and then quickly understand the impact of a range of responses. Continuous planning also supports a culture of accountability because it enables broad collaborative participation in the process. However, continuous planning is feasible only when a company uses dedicated planning software that can remove the barriers to better planning that spreadsheets impose.